The cannabis industry is growing and evolving at a rapid pace. New York legalized cannabis for medical purposes in the past, but now that it’s legal to sell and consume recreationally, everyone is wondering what to expect.
New York became the 15th state to legalize recreational cannabis on March 31, 2021. Once the market becomes established, we’re looking at a $7 billion sector.
The legislation in New York is not a free-for-all either. There are strict regulations and compliance requirements for conducting business, but you can set up your company properly to run smoothly with proper guidance.
Looking for help establishing your cannacompany in New York? Contact us now for assistance structuring and scaling your cannabis venture.
Cannabis Legalization in New York: What’s Happening?
Cannabis sales in New York will not begin until sometime in 2022. However, it’s now legal for New Yorkers 21 years of age or older to possess and smoke cannabis.
Governor Cuomo recently signed a bill that legalized adult-use cannabis and expanded the state’s medical cannabis program. He added to the list of qualifying medical conditions for medical marijuana, as well as the product options. The current program prohibits cannabis flower products. However, with the update, this prohibition could be lifted.
This is a significant win for New Yorkers with previous marijuana convictions, as well. Under the law, those records will be wiped clean.
New Yorkers are allowed to grow marijuana at home, have it delivered, and consume it in consumption lounges through this legislation. This is expected to spark new businesses and innovations throughout the region.
But with these advances, more legislation is essential to regulate the market.
So far, we understand that existing medical operations in New York will be some of the first allowed to do business in New York’s recreational sector. But they’ll need to pay a fee. However, as vertically integrated operations, these businesses will have an advantage over the entrepreneurs looking to get involved in the space.
The law’s goal is to have 50% of the licenses distributed to social equity applicants. These are the applicants from communities disproportionately affected by the War on Drugs, small distressed farmers, service-disabled veterans, and women.
There will be a 13% sales tax on cannabis products. According to the bill, this includes 9% allocated to the state and 4% to the local municipality. New York will also have an excise tax that’s based on milligrams of THC in the products.
This tax revenue will fund a social equity fund, education, and drug-education programs.
The bill has also formed an Office of Cannabis Management and a Cannabis Control Board to regulate New York’s cannabis sector. However, advocates throughout the industry have worked and will continue to work to shape New York’s legal cannabis market. These lawmakers, advocates, and company executives will continue to play a significant role in how regulations and the market progress.
What to Expect Bringing Your Cannabis Company to New York
While cannabis business operators will not be permitted to vertically integrate due to New York’s cannabis regulations, it’s still possible to obtain your piece of the NY cannabis pie. The state has over 19 million residents and attracts millions of people globally each year, meaning there should be more than enough consumers to go around.
Some large-scale cannabis operations are planning their move into New York’s cannabis sector. Mainly cultivators. This is because these operations are choosing to focus more on their branding and product quality over their retail presence. Analysts believe that as the New York adult-cannabis sector matures, these operations will start to operate as consumer product companies.
Anyone interested in coming into New York as a vertically integrated cannabis company might consider obtaining an existing license holder. Some of the current operators are financially troubled or privately owned, which means they’ll likely get acquired through an M&A deal.
Looking to obtain an existing license holder in New York through an M&A? Contact us now for expert assistance analyzing their financials.
More on New York Adult-Use Cannabis Legislative Progress
The state has been working to legalize recreational cannabis for years. Still, Governor Cuomo and the state legislature have found it challenging to determine terms and set up the recreational program. Now that the bill has been agreed upon and the legislature has been passed, the industry will progress with more transparency, more preservations for social equity programs, and less gubernatorial control.
New York will now rival other Northeast states that have legalized, including New Jersey.
Cuomo has discussed the pressure New York is under to establish its recreational market.
“We have passed the point of legalized cannabis,” Cuomo explained just before the agreement was reported. “It’s in New Jersey. It’s in Massachusetts. To say we’re going to stop it is not an option. It is here. The only question is, do we regulate it here, do we gather the revenue here, or do we have people driving to New Jersey, which is right there, or to Massachusetts if you’re in a northern part of the state. But it is here.”
What’s in New York’s Adult-use Legalization Bill?
- Cannabis is legal for adults 21 years old or older.
- Adults can possess up to 3 ounces of cannabis and 24 grams of cannabis concentrate.
- New Yorkers are allowed to grow up to three plants per person and six plants per household. Advocates view this as a crucial component of cannabis equity because many people cannot afford to purchase at dispensary prices.
- The tax rate for cannabis in New York will be 13 percent. Nine percent will go to the state, and four percent is allocated to localities. The governor’s office believes that it will raise approximately $350 million each year in tax revenue once the program is operating fully.
- The state will establish an Office of Cannabis Management (OCM). This will be in charge of overseeing the recreational and medical cannabis spaces. There will be a five-member board leading the office; the governor will appoint three members, and the state Senate and state Assembly will each appoint one.
- The OCM will offer oversight using a two-tier licensing program that will separate growers and processors from the cannabusiness owners operating retail establishments. There is no information regarding how many licenses it will issue.
- The state will allow cannabis delivery, along with club-like consumption sites. However, these consumption locations for cannabis will not allow alcohol.
Cannabis Ancillary Firms in New York Experiencing an Influx
Now that the new cannabis market in New York is opening up, companies are preparing for it. Cannabis-focused ancillary firms, including but not limited to law practices, marketers, and recruiting agencies, are experiencing an increase in business.
We’ve also been experiencing our share of inquiries about structuring cannabis businesses in New York, organizing the financials for cannabis operations interested in M&A, and more.
Need help with your cannabis business in New York? We have you covered! Contact us now for assistance structuring and scaling your cannbusiness in this maturing market.